Product displacement

The European Union’s patchwork of overlapping and ill-enforced rules on product safety and traceability are in dire need of harmonisation. Cue a proposal from the European Commission in February 2013. Yet, after almost a year of negotiations, the failure of member states to agree on one aspect, namely a rule that would require consumer goods to carry country-of-origin labels, makes the adoption of the proposal unlikely before the European Parliament elections in May.

Under the proposal, manufacturers can choose between affixing a “made in the European Union” label or a country-of-origin label. MEPs in October broadly backed this approach, in spite of a split between MEPs along a north-south divide.

Greece, which holds the rotating presidency of the Council of Ministers, is expected to present a new compromise on Friday (31 January), but member states appear to have split into two blocking minorities. The latest options are either limiting the country-of-origin rules to higher risk products – such as textiles and toys – or instructing the Commission to undertake an impact assessment of the rule’s effect on businesses with a view to a future proposal.

For the Commission, France, Italy, Portugal and other supporters, country-of-origin labels would substantially improve the traceability of goods and product safety. Around 10% of dangerous consumer goods logged by the EU’s market surveillance system cannot be traced back to the manufacturer, according to the Commission. Knowing in which country a defective toy was made would help authorities from that country to identify the manufacturer more quickly.

But rules of origin are not only about product safety: they could have a significant effect on branding. They have won support among sectors seeking to protect their identity at a national level. For example, non-Italian firms could no longer use “Italian-sounding names” to boost trade via a supposed link to Italy, says the Italian ceramics industry body. But critics of the country-of-origin rule, led by Germany and the United Kingdom, see the proposal as a covert attempt to bolster the industries of southern EU member states, where production processes tend to be simpler and less globalised, at the expense of northern European manufacturers.

Country-of-origin labels are misleading in the case of complex products, they argue, with the support of two leading EU consumer groups. It is neither correct nor fair to say that a consumer product designed in Germany with parts sourced from several countries and assembled in India is “made in India”, the detractors maintain.

They also point to rulings from the EU courts that have held that country-of-origin labels hinder trade between member states by allowing consumers “to assert any prejudices which they may have against foreign products”.

But the dispute is holding up reforms that industry describes as much-needed. It is “unacceptable” that a dispute over country-of-origin rules has brought the Commission’s plan to deepen the single market and remove barriers to trade to a position of “stalemate, thus making our companies collateral victims”, associations representing European machinery manufacturers told member state governments in a letter on 20 January. “In the meanwhile, they continue to face major problems due to unfair competition with non-conforming products on the EU market.”

The Commission’s proposal was presented by Antonio Tajani, the European commissioner for industry and entrepreneurship, who is from Italy, and Tonio Borg, then the European commissioner for health and consumer policy, who is from Malta, in February 2013. (Responsibility for consumer policy has since been given to Neven Mimica, Croatia’s European commissioner.)

Detractors say that the ‘made-in’ label rules were added only at the last minute after member states – led by Germany and the UK – rejected a similar rule in a trade proposal, a point they say is supported by the Commission not having undertaken an impact assessment.